Amid a frenzy of publicity that the popular U.S. department store Target is scouting for locations in Canada, a Target store has quietly opened its doors in an unlikely location – Nanaimo, B.C. Another Target is scheduled to open soon in Sudbury, Ont., followed by one in Surrey, B.C. next spring.

The new outlets aren’t exactly located in fashion hubs. But then, these Target discount apparel stores aren’t owned by Target of Minneapolis: They’re run by a Canadian retail mogul who could make the American giant’s foray into Canada very costly, or potentially foil the company’s plans altogether.

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The mogul in question, Toronto fashion merchant Isaac Benitah, has owned the rights to the Target name in Canada for almost a decade. Today, the U.S. discounter is challenging Mr. Benitah’s right to use the name before federal trademark authorities. Undeterred, Mr. Benitah is pressing on with plans to expand his Target Apparel chain by adding at least a dozen of the superstores across the country in the next couple of years, a source familiar with the situation said.

“Obviously, it’s a giant hurdle” for Target Corp., said George Hartman, a former Bay Street retail analyst and now a partner in the investment bank Capital Canada Ltd. “Can Isaac stop Target from using that name at all?”

Dealing with Mr. Benitah isn’t a new problem for Target. In 2002, the U.S. chain first took issue with Mr. Benitah’s right to use the name; ultimately, the case went to the Federal Court of Appeal, which came down in his favour five years later. This summer, the U.S. company tried again. It filed another challenge with a Canadian trademark office, arguing that because Mr. Benitah hadn’t used the Target name for three years, his right to it had dissolved under domestic trademark laws.

Known for its red bull’s-eye logo and low-cost lines by designers such as Alexander McQueen, Target has been exploring the Canadian market for about a decade. It has considered scooping up discounter Zellers, which has emulated Target in many of its strategies. But in January, Target finally disclosed publicly that it was looking into launching stores in Canada. Since then, its officials have been talking to landlords here about possible store sites.

But first it has to deal with the name issue. In 2001, Mr. Benitah acquired the Target Apparel label for men’s clothing from the failing retailer Dylex Ltd.

About six months later, Target Corp. filed a challenge with the federal trademark office. It agreed with Target, but the Federal Court of Canada overturned the decision. The appeal court upheld the judgment in 2007.

Now Target is back at the trademark office, trying again to knock out Mr. Benitah’s right to the Target moniker.

“I guess it’s made more pressing because Target has indicated a willingness to come to Canada now,” said Ron Dimock, a lawyer with Dimock Stratton LLP in Toronto.

“Until a decision is made to invalidate the mark [of Mr. Benitah] this represents somewhat of a shield to Target’s entry into Canada,” he said. The case could be dragged out for years, with appeals available at two levels of federal court, he added.

Mr. Benitah was out of town and unavailable for an interview. He said in an e-mail that the Target Apparel brand dates back to the early 1980s when its was owned by Dylex. Dylex, in its heyday, held huge sway in the malls, owning many banners including Fairweather, Tip Top Tailors and Harry Rosen.

Mr. Benitah, who is chief executive officer of INC Group of Cos, also runs a no-frills Target Apparel outlet store in Toronto, next to his head office.

‪ Target Corp. spokeswoman Erika Svingen said the U.S. chain is “excited to explore opportunities in Canada. While it’s too early to share details, we are optimistic that we could open our first stores there by mid-decade.” She would not comment directly on the trademark case.

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